Cryptocurrency

A cryptocurrency is a digital asset that works as a medium of exchange. It is a type of digital or virtual currency that uses cryptography in order to secure transactions, generate new units, and verify the transfer of assets.

As opposed to regular money transacted through banks, the control of a cryptocurrency is decentralized and works through a distributed ledger called a blockchain – an ever-growing sequence of blocks (digital records that hold data), which are tied together and secured using cryptography. A blockchain provides the validity of each cryptocurrency’s coins.

Bitcoin is the first decentralized cryptocurrency and was created in 2009 by Satoshi Nakamoto. Since then, over 1800 cryptocurrencies have been created.

Advantages

Decentralization. A cryptocurrency system does not require a central authority to function, as it always keeps a record of units and their ownership. The system defines rules regarding the creation of new units, the circumstances of their origin, and the way to establish the ownership of these new units. Additionally, the use of timestamping schemes renders a trusted third party obsolete.

Protection from payment fraud. Cryptocurrencies cannot be forged or counterfeited, and the transactions can't be reversed.

Fast payment processes. Cryptocurrency payments are made in just a few seconds because there is no need for much information input.

Privacy. When doing a transaction, you are not required to give your identity or location.

There are no chargebacks involved. As soon as the transfer is done, it cannot be reversed.

Transparency. All the transactions are recorded and monitored through an open ledger.

High portability. As opposed to physical money, cryptocurrencies can be transported in high amounts (such as billions of dollars in value) in just one memory drive.

Disadvantages

Unrecoverable if lost. In contrast to banks, which offer coverage in case of a security breach, cryptocurrencies cannot be recovered if you are a victim of cybercriminals.

Untraceable. Even though it might sound like a benefit, this feature makes cryptocurrencies a good choice for criminal activities. As a consequence, some countries may ban this sort of transactions in the future.

Not so easy to understand. Cryptocurrencies are relatively new, and the learning curve regarding their usage can be pretty steep for most people.

High price volatility. Because the prices of cryptocurrencies fluctuate sharply over short periods of time, the majority of businesses don’t accept them as a medium of payment.

Not globally accepted. While more and more websites do accept digital money, it's far from being very popular among retailers and other companies. Moreover, there are just a few countries that regulated cryptocurrency transactions.

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